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Walmart Inc. now requires all its suppliers to deliver goods on time and in full 98% of the time. The change, effective today, represents a huge jump for less-than-truckload suppliers, which previously had to meet only a 70% threshold.

Full truckloads from suppliers previously had to deliver shipments on their scheduled date 87% of the time. The 98% rate now applies to both full and less-than-full truckload shipments in the general merchandise, health and wellness, and food and consumables categories, Walmart spokeswoman Robyn Babbitt said.

Suppliers that don't meet the delivery threshold in a given month are fined 3% of the value of the products that don't meet the target.

"When we have the amount of product we ordered, delivered on time, we are able to sell more of a supplier's products to customers," Babbitt said. "Our hope is that we don't have to collect any fees. We would much rather have our products accurately delivered on time so we can get it to our customers when they are shopping for it."

Walmart told suppliers of the change Sept. 1 in a memo from Scott McCall, chief merchandising officer for Walmart U.S., and Greg Smith, executive vice president of Walmart U.S. supply chain. They said the company was "updating" the standards "to simplify goals and align the program between stores and e-commerce."

The Bentonville-based retailer started the On Time and In Full program in 2017 and has raised the thresholds several times since then.

Babbitt said Walmart temporarily relaxed the delivery requirements for several months of the covid-19 pandemic "because of the extraordinary circumstances we were all navigating."

"We believe now is the right time to reinstate our requirements to ensure customers can continue finding the products they want on our shelves, in store and online," Babbitt said. "We know that when the products we've ordered arrive on time, it results in a happier customer."

Colby Beland, vice president of corporate sales solutions for Hub Group, the parent company of logistics firm CaseStack, said Walmart typically gives suppliers six-month notice before implementing such changes. The two-week notice puts pressure on many small and mid-sized businesses to comply with the new thresholds.

While the change won't significantly affect CaseStack's operations, Beland said, it's a challenge for less-than-truckload suppliers that aren't using consolidation services like those CaseStack provides.

Beland said CaseStack already meets or exceeds 98% on-time delivery. But the pandemic has put many suppliers behind in their production because of factors such as getting raw materials to make their products and changes in consumer shopping behavior.

There's a 'capacity crunch" across the manufacturing and supply-chain system, Beland said. "It's a carriers' market, because capacity is really tight, transportation costs are through the roof, and we're in the historical peak season for the holidays," when retailers are stocking their warehouses so items will be on hand during the Christmas shopping season.

"A lot of suppliers are scratching their heads, wondering why [Walmart is] doing this now, in the middle of all this," Beland said.

Greg Forbis, senior vice president of strategy and business development at RJW Logistics Group, said less-than-truckload retail suppliers today "have to really step back and assess what your past performance looks like." If they aren't making Walmart's target, they need to figure out what they need to get there, he said.

Then they need to ask themselves if they're with the right providers "that can give the transparency you need to perform at very high levels."

Forbis, who works in the Illinois-based company's Bentonville office, said RJW also meets or exceeds the 98% mark already.

"We are built for this because we do retail consolidation and retail logistics. That's our core business," Forbis said. "We've been able to achieve 98%, at or above, pre-covid-19 and through covid, the last six months."

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